8.

YU TEK and CO vs. BASILIO GONZALES, G.R. No. L-9935, February 1, 1915

Facts:

A contract was executed between the herein parties, whereby Mr. Basilio Gonzales
acknowledges the receipt of P3,000 from Yu Tek & Co., and that in consideration of which he
obligates himself to deliver to the latter 600 piculs of sugar of the first and second grade,
according to the result of polarization, within 3 months. There is a stipulation providing for
rescission with P1,200 penalty in case of failure to deliver. No sugar was delivered, so plaintiff
filed a case praying for the judgment of P3,000 plus P1,200. P3,000 was awarded, thus, both
parties appealed.

Issues:

(1) Whether compliance of the obligation to deliver depends upon the production in
defendant’s plantation

(2) Whether there is a perfected sale

(3) Whether liquidated damages of P1,200 should be awarded to the plaintiff

Held:

(1) There is not the slightest intimation in the contract that the sugar was to be raised by the
defendant. Parties are presumed to have reduced to writing all the essential conditions of their
contract. While parol evidence is admissible in a variety of ways to explain the meaning of
written contracts, it cannot serve the purpose of incorporating into the contract additional
contemporaneous conditions which are not mentioned at all in the writing, unless there has
been fraud or mistake. It may be true that defendant owned a plantation and expected to raise
the sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is
that the condition which the defendant seeks to add to the contract by parol evidence cannot
be considered. The rights of the parties must be determined by the writing itself.

(2) We conclude that the contract in the case at bar was merely an executory agreement; a
promise of sale and not a sale. At there was no perfected sale, it is clear that articles 1452,
1096, and 1182 are not applicable. The defendant having defaulted in his engagement, the
plaintiff is entitled to recover the P3,000 which it advanced to the defendant, and this portion
of the judgment appealed from must therefore be affirmed.
(3) The contract plainly states that if the defendant fails to deliver the 600 piculs of sugar within
the time agreed on, the contract will be rescinded and he will be obliged to return the P3,000
and pay the sum of P1,200 by way of indemnity for loss and damages. There cannot be the
slightest doubt about the meaning of this language or the intention of the parties. There is no
room for either interpretation or construction. Under the provisions of article 1255 of the Civil
Code contracting parties are free to execute the contracts that they may consider suitable,
provided they are not in contravention of law, morals, or public order. In our opinion there is
nothing in the contract under consideration which is opposed to any of these principles.

9.

Continental Cement Corporation vs. Asea Brown Boveri, et al., G.R. No. 171660.

October 17, 2011,

FACTS:

Sometime in July 1990, petitioner Continental Cement Corporation (CCC), a corporation

engaged in the business of producing cement, obtained the services of respondents Asea
Brown Boveri, Inc. (ABB) and BBC Brown Boveri, Corp. to repair its 160 KW Kiln DC Drive Motor
(Kiln Drive Motor).

On October 23, 1991, due to the repeated failure of respondents to repair the Kiln Drive Motor,
petitioner filed with Branch 101 of the Regional Trial Court (RTC) of Quezon Citya Complaint for
sum of money and damages.

Respondents, however, claimed that under Clause 7 of the General Conditions, attached to the
letter of offer dated July 4, 1990 issued by respondent ABB to petitioner, the liability of
respondent ABB "does not extend to consequential damages either direct or indirect.
"Moreover, as to respondent Eriksson, there is no lawful and tenable reason for petitioner to
sue him in his personal capacity because he did not personally direct the repair of the Kiln Drive
Motor.

The RTC rendered a Decision in favor of petitioner rejecting the defense of limited liability
interposed by respondents since they failed to prove that petitioner received a copy of the
General Conditions.

On appeal, the CA reversed the ruling of the RTC. The CA applied the exculpatory clause in the
General Conditions and ruled that there is no implied warranty on repair work; thus, the
repairman cannot be made to pay for loss of production as a result of the unsuccessful repair.
ISSUE:

Whether or not implied warranty and warranty against hidden defect under the New Civil Code
is applicable

HELD:

Clause 7 of the General Conditions their liability "does not extend to consequential damages
either direct or indirect." Is not binding on petitioner. Respondents failed to show that
petitioner was duly furnished with a copy of said General Conditions. Having breached the
contract it entered with petitioner, respondent ABB is liable for damages pursuant to Articles
1167, 1170, and 2201 of the Civil Code

As per Purchase Order Nos. 17136-37, petitioner is entitled to penalties in the amount of
P987.25 per day from the time of delay, August 30, 1990, up to the time the Kiln Drive Motor
was finally returned to petitioner. Under Article 1226of the Civil Code, the penalty clause takes
the place of indemnity for damages and the payment of interests in case of non-compliance
with the obligation, unless there is a stipulation to the contrary. In this case, since there is no
stipulation to the contrary, the penalty in the amount ofP987.25 per day of delay covers all
other damages (i.e. Production loss, labor cost, and rental of the crane) claimed by petitioner.

The court ruled to deny petitioners claim to recover production loss, labor costs and the rental
of crane, attorney’s fees.

10.

HEIRS OF GAITE VS THE PLAZA INC.

G.R. No. 177685

January 26, 2011

FACTS:

On July 16, 1980, The Plaza, Inc. (The Plaza), a corporation engaged in the restaurant
business, through its President, Jose C. Reyes, entered into a contract with Rhogen Builders
(Rhogen), represented by Ramon C. Gaite, for the construction of a restaurant building in
Greenbelt, Makati, Metro Manila for the price of P7, 600,000. On July 28, 1980, The Plaza paid
P1,155,000 down payment to Gaite and soon after Rhogen commenced construction of
the restaurant building.2 Months later, Engineer Angelito Z. Gonzales, the Acting Building
Official of the Municipality of Makati, ordered Gaite to cease and desist from continuing with
the construction of the building for violation of The National Building Code.

The Plaza’s Project Manager Architect Roberto evaluated the Progress Billing and Tayzon stated
that actual jobsite assessment showed that the finished works fall short of Rhogen’s claimed
percentage of accomplishment and Rhogen was entitled to only P32, 684.16 and not P260,
649.91 being demanded by Rhogen. On the same day, Gaite notified Reyes that he is
suspending all construction works until Reyes and the Project Manager cooperate to resolve
the issue he had raised to address the problem.

Gaite informed The Plaza that he is terminating their contract based on the Contractor’s Right
to Stop

Work or Terminate Contracts as provided for in the General Conditions of the Contract
and demanded the payment of P63, 058.50 representing the work that has already been
completed by Rhogen. Reyes also informed Gaite that The Plaza will continue the completion of
the structure utilizing the services of a competent contractor but will charge Rhogen for
liquidated damages as stipulated in Article VIII of the Contract The Plaza filed a civil case for
breach of contract, sum of money and damages against Gaite and FGU in the Court of First
Instance (CFI) of Rizal. The RTC Makati rendered its decision granting in favor of the Plaza
against Gaite. The Court of Appeals affirmed such decision with modification.

ISSUE:

Whether or not the Rhogen had factual or legal basis to terminate the General
ConstructionContract.

HELD:

The construction contract between Rhogen and The Plaza provides for reciprocal obligations
whereby the latter’s obligation to pay the contract price or progress billing is conditioned on
the former’s specified performance. Pursuant to its contractual obligation, The Plaza furnished
materials and paid the agreed down payment. Rhogen, having breached the contractual
obligation it had expressly assumed specifically to comply with all laws was already at fault.
Respondent The Plaza, on the other hand, was justified in withholding payment on Rhogen’s
first progress billing. Upon the facts duly established, Rhogen committed a serious breach of its
contract with The Plaza, which justified the latter in terminating the contract. Article 1170 of
the Civil Code provides that those who in the performance of their obligations are guilty of
fraud, negligence or delay and those who in any manner contravene the tenor thereof are liable
for damages. Petition DENIED